Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose. Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose.

EUR/USD and EUR/GBP neutral ahead of FOMC but GBP/USD forms a bullish reversal pattern

GBP/USD forms a bullish hammer reversal pattern on the daily candlestick chart, while the euro struggles against both the dollar and the pound.

EUR/USD still flirts with the channel support line ahead of the FOMC statement

Yesterday EUR/USD briefly slid through the two-month channel support line at $1.1294, to a new January low at $1.1263, before trading back around the channel line ahead of today’s Federal Open Market Committee (FOMC) meeting. A drop through yesterday’s low at $1.1263 would lead to the mid-December low at $1.1222 as well as the November trough at $1.1186 being eyed.

So far, the downtrend from mid-January continues to cap the cross. While EUR/USD remains below the last reaction high at $1.1369, the 20 January high, the bears stay in control. Above it, more significant resistance can be made out between the late-November and December highs at $1.1383 to $1.1387.

EUR/GBP gives back most of this week’s gains

Even though EUR/GBP technically formed a bottom by rising above the November low and last week’s high at £0.8379 to £0.8381, yesterday’s slip may trigger further short-term weakness which is likely to peter out above the current January low at £0.8305, however. This low was made right within major support at £0.8313 to £0.8277, consisting of the December 2016, April 2017, December 2019 and February 2020 lows.

While EUR/GBP stays above the 24 January low at £0.8351, the bulls should retain the upper hand. A drop below this level may lead to the early-January low at £0.8335 being back in the picture, though. Together with the 11 January trough at £0.8324, this level is expected to withstand any downside pressure before renewed upside momentum is likely to enter the fray. Good resistance can now be found between early January and this week’s highs at £0.8419 to £0.8423.

GBP/USD formed a hammer on the daily candlestick chart

GBP/USD's descent since its $1.3749 mid-January peak has practically taken it back to its early January low at $1.3431 by dropping to yesterday’s low at $1.3436 before forming a bullish Hammer on the daily candlestick chart. This may well denote the end of the last couple of weeks’ countertrend correction.

While $1.3431 underpins, a rise back towards the 200-day simple moving average (SMA) at $1.3661 is to ensue, confirmation of which would be an advance above the 24 January high at $1.3565. Currently, unexpected failure at $1.3431 could lead to a drop to the 61.80% Fibonacci retracement and mid-December high at $1.3387 to $1.3374 to ensue, however.

This information has been prepared by IG, a trading name of IG US LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. Any research provided should be considered as promotional and was prepared in accordance with CFTC 1.71 and designed to promote the independence of investment research. See our Summary Conflicts Policy, available on our website.

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